Stocks

Tesla Inc Q3 2017 Earnings Preview: What Matters More Than Numbers

Tesla Inc (NASDAQ:TSLA) Q3 2017 earnings are set for release on Wednesday after closing bell, and analysts are projecting adjusted losses of $2.28 per share on $2.9 billion in revenue. In last year’s third quarter, the automaker reported adjusted earnings of 71 cents per share on $2.3 billion in sales.

Tesla q3 2017 earnings
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Tesla Q3 2017 earnings estimates slashed by UBS

On Monday, UBS analyst Colin Langan reiterated his Sell rating and $185 price target for Tesla stock and reported that he has slashed his estimates for the automaker’s third quarter. He believes the company is still having problems manufacturing the Model 3 and estimates Tesla Q3 2017 earnings at losses of $2.20 per share.

Tesla announced earlier this month that it had delivered 26,150 vehicles, of which only 220 were Model 3 cars. At the time, consensus had stood at 25,860 vehicles including 1,260 Model 3 cars. The EV maker had said two months before revealing its third-quarter numbers that it expected to manufacture 1,500 Model 3 cars, so Langan notes that this undermines the credibility of any future targets for the Model 3 and also increases near-term risks for the company.

He slashed his estimates to full-year losses of $6.40 per share for 2017 and losses of $3.30 per share for 2018, compared to $5.30 and $3.30 per share previously, respectively. He also warned that Tesla will probably need outside capital again, and he notes that as the Model 3 production ramps, there will be a “temporary working capital cash boost.” However, any setback in production will intensify the company’s cash burn troubles.

He also pointed out that competitors are planning to release EVs that can better compete with the Model 3, and any lengthy delay could reduce Tesla’s “market share opportunity.” He projects $900 billion in cash burn for the third quarter.

Tesla stock hangs on the Model 3

Tesla stock was unaffected by the ultra-bearish note from UBS as it ticked higher by as much as 0.08% to $321.12 during regular trading hours on Monday. Year to date, Tesla stock is up by about 50%, proving that its status as a story stock is still intact. The shares retreated on Friday after a series of negative news and a downgrade by Evercore ISI.

Given that Wall Street has repeatedly ignored the company’s fundamentals all year, Tesla Q3 2017 earnings may not have much of an impact on the company’s stock either, particularly if management can convince investors that things aren’t too bad. Argus analyst Bill Selesky told MarketWatch that if the automaker can show that Model 3 demand remains strong and that “the market for its luxury vehicles is not reaching saturation,” then investors probably will look past the third-quarter numbers.

He feels that demand is what Wall Street is focused on right now and that the production shortfalls won’t become important until 12 or 18 months from now.